Insisting upon advance fee, bank guarantee for Entire MBBS Course during admission is Illegal: Rajasthan HC

The High Court division bench comprising of Justices Rameshwar Vyas and Sangeet Lodha has thus retrained all medical institutions (both government and private) from demanding any amount from the students other than the fees for one year or semester.

"Insisting upon the students who are otherwise eligible to be admitted to the course being meritorious but are not in position to arrange the requisite funds to procure a bank guarantee towards the fees for entire course duration would be absolutely unjustified.," the High Court held on Monday.

"The action of the respondent private institutions and the medical/dental institutions run by the State Government in levying advance fee in addition to annual fee for one year from the students admitted to the medical courses and insisting upon each and every student to submit the bank guarantee at the time of admission equivalent to the fee for 3½ years of course duration is declared illegal," further mentioned the order.

Noting that the banks are discouraged from giving unsecured guarantee even by the Reserve Bank of India, and the guarantee could only be obtained only on furnishing collateral security or fixed deposits, the Court ruled, "the insistence for furnishing bank guarantee towards the fee for entire duration of the course upon each and every student, merely because some of the students may leave the course in midstream, appears to be unreasonable and unfair."

Besides, the Court held that ordinarily, "no student who has already deposited the huge fee for one year and pursued the studies would leave the course in midstream."

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The High Court was listening to a petition filed by an advocate who challenged the condition imposed by the respondents private medical institutions that the students seeking admission to MBBS Course to submit a bank guarantee against the annual fees for the next 3½ years of course duration in addition to the deposit of annual fee for the first year of the course, at the time of admission.

The petition sought direction upon private medical colleges to accept bond (in place of bank guarantee) and that too only from such students with regard to whom the institutions feel that any student/students might leave the Institutes midterm. It further requested the Court to term such actions on the part of medical institutions seeking to submit bond/bank guarantee at the time of admission against the tution fee for remaining course duration of three and half years as arbitrary, illegal, and bad in the eyes of law.

The State Government in reply submitted before the Court that charging of bank guarantee/advance fee by the private medical institutions in the State of Rajasthan is not approved by the State.

Some of the Private Medical colleges raised objections claiming that the levy of fee by the respondent college is governed by Fee Regulatory Committee, Department of Medical Education, Government of Rajasthan. They further claimed that as per the laws laid down by the Supreme Court in Islamic Academy(supra), the institutions are permitted to receive the bank guarantee from the students for the balance fees for the whole course to secure the institution in the event the students leave in midstream.

Claiming that they get no aid from the Government authorities, the Private medical colleges further stated that the fees charged from the students are the only amount utilized for the benefit/use of that educational institution and the institutes do not charge either directly or indirectly any other amount except the amount fixed as fees.

They also pointed out that many students after taking admission in a medical college and blocking their seats again appear in NEET Exams in the next academic session and after securing admission to another college, leave their studies in midstream, wherein the medical colleges have to suffer the loss for the vacant seats.

Further calling the prayer of the petition demanding to insist for bank/bond guarantee from students who might leave the institution midstream as "absolutely irrational", one Private medical college submitted that at the time of taking admission in MBBS course, the private colleges have no means to comprehend and determine as to which student may or may not leave the MBBS Course midstream.

The petitioner, on the other hand, referred to the Apex Court judgment in Islamic Academy(supra), where while dealing with the question 'whether the educational institutions are entitled to fix their own fee structure', the Court categorically held that in educational institutions, there can be no profiteering motive and capitation fee cannot be charged.

The Court further held that if an institution feels that any particular student may leave in midstream then, at the highest, it may require that student give a bond/bank guarantee that the balance fees for the whole course would be received by the institute even if the student left in midstream, contended the petitioner.

Thus, in no manner, the private institutions can demand bond/bank guarantee from each and every student admitted to the course.

It was further pointed out by the petitioner that where the parents of the students are not in a position to furnish the bank guarantee, the respondent institutions in addition to the annual tuition fee for the first year of the MBBS Course, charge an advance fee from the students for one more year, which is apparently, violative of the directions issued by the Supreme Court.

The petitioner further submitted that the advance fee charged is also not kept in a separate account and the interest accrued thereon is neither adjusted against the annual fee payable by the students for the subsequent years nor returned to them at the end of the course and thus, the respondent institutions are apparently indulged in profiteering and charging capitation fee in defiance of the directions issued by the Supreme Court.

After listening to all the contentions and referring to several judgments, the High Court bench held that "The education is essentially a charitable activity, which cannot be regarded as profession, trade or business rather, it will fall within the meaning of expression "occupation" under Article 19(1)(g) of the Constitution of India."

Although there is autonomy with the institution in fixing the fee structure but it has to be rational and there cannot be any profiteering motive and no capitation fee could be charged.

Thus, noting that charging an advance fee for more than one year is apparently in defiance of the directions issued by the Supreme Court in Islamic Academy (supra), the HC bench held

"The action of the respondent private institutions and the medical/dental institutions run by the State Government in levying advance fee in addition to annual fee for one year from the students admitted to the medical courses and insisting upon each and every student to submit the bank guarantee at the time of admission equivalent to the fee for 3½ years of course duration, is declared illegal."

Ruling that the private medical institutions are restrained from recovering any amount as advance fee in addition to the fee for one year from any student admitted to the course, the HC bench held that the private medical institutions shall be at liberty to ask for the bond/bank guarantee from a particular student in conformity with the directions issued by the Hon'ble Supreme Court in Islamic Academy's case.

"The advance fee in addition to the fee for one year already recovered by any of the private institutions from the students admitted to the medical courses shall be kept in a fixed deposit in a nationalized bank against which no loan or advance may be granted. The advance fee deposited as aforesaid shall carry interest at the rate equivalent to the rate of interest admissible on fixed deposit by the nationalized bank. The interest already accrued and the future interest on the amount of advance fee shall be paid to the students from whom the advance fees were collected at the time of admission," further directed the Court.

To view the original court order, click on the link below.

https://medicaldialogues.in/pdf_upload/rajasthan-high-court-pil-155075.pdf

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